Structural Budget Balance

Euro Area member states have agreed to introduce a structural budget balance target to their national legislation (Treaty on Stability, Coordination and Governance). However, there exists no commonly agreed methodology to calculate this macroeconomic indicator. This report presents the conceptual framework underlying the calculation of structural fiscal balances as suggested by different international organizations such as the European Commission and the IMF. We emphasize that the methodology indeed affects both the quantitative estimates and the interpretation of the indicator for policy analysis. In addition we discuss some of the possible limitations of the indicator within real-time macroeconomic surveillance.